“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Halliburton Company (NYSE: HAL)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 06/18/1999 |
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| End date: | 06/17/2019 | ||||
| Start price/share: | $22.94 | ||||
| End price/share: | $21.97 | ||||
| Starting shares: | 435.92 | ||||
| Ending shares: | 585.67 | ||||
| Dividends reinvested/share: | $8.46 | ||||
| Total return: | 28.67% | ||||
| Average annual return: | 1.27% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,872.90 | ||||
As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 1.27%. This would have turned a $10K investment made 20 years ago into $12,872.90 today (as of 06/17/2019). On a total return basis, that’s a result of 28.67% (something to think about: how might HAL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Halliburton Company paid investors a total of $8.46/share in dividends over the 20 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).
Based upon the most recent annualized dividend rate of .72/share, we calculate that HAL has a current yield of approximately 3.28%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .72 against the original $22.94/share purchase price. This works out to a yield on cost of 14.30%.
Another great investment quote to think about:
“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” — Robert Allen
